Irish retirees in the Algarve, and those considering the move to Portugal, are being warned of a looming pension tax trap that could cost them dearly if they fail to act in time.
Ireland is bringing its pension framework into line with wider EU rules under the IORP II Directive, which introduces stricter regulation and greater transparency across member states.
As a result, thousands of single-member pensions and Personal Retirement Savings Accounts (PRSAs) are being phased out and shifted into new structures – many of which cannot be transferred abroad without incurring heavy Irish tax penalties.
With around 90,000 accounts set to close by April 2026, the clock is ticking. Financial advisers caution that waiting until the final months will be too late, and are urging those affected to begin restructuring their pensions well in advance.
To support Irish nationals in Portugal, a free webinar is being hosted this October.
Wealth management expert Chris Marson explained:
“Irish people with these pensions will be forced to move them in order for Ireland to come into line with what is known as the IORP II Directive.
“The IORP II (Institutions for Occupational Retirement Provision) Directive is designed to set common standards to ensure the soundness of pensions across the EU member states.
“Current pension providers will be asking those with these pensions to wind up their existing scheme and transfer to a new product.
“However, you may inadvertently get transferred to one that cannot transfer abroad without a high Irish tax charge on exit.”
At present, Irish expats in Portugal who qualified under the original Non-Habitual Resident (NHR) tax regime – which closed to new applicants in 2024 – pay a flat 10% tax rate on pensions. But if their savings are moved into an inflexible scheme under the new rules, they could be hit with an Irish tax bill of up to 50%.
Chris Marson added:
“It is essential, to avoid falling into this trap, people in Ireland who have moved to Portugal or elsewhere, or are planning to, take steps now to mitigate the financial hit they could face.
“You need to be proactive in seeking expert advice and do so sooner rather than later. Leave it until April and it will be too late. We would recommend you take steps before 2025 is over.”
Paul Stannard, chairman and founder of Portugal Pathways, which supports high-net-worth individuals and their families navigate the Golden Visa, tax issues and real estate in Portugal, and the Portugal Investment Owners Club, stressed the urgency:
“This is a time-sensitive issue which those with Irish pensions need to be alert to and look to take immediate action – well in advance of the April 2026 deadline.
“At Portugal Pathways we can put you in touch with cross-border pension experts who can talk you through the options and what you need to do.
“There’s a real sting in the tail if you don’t act, so we urge anyone likely to be affected to seek professional advice.
“Join our Navigating the Upcoming Irish Pension Changes webinar to learn exactly how to protect your Irish pension from the new legislation - and discover how to make your Irish pension work harder for you in the most tax-efficient way possible.”
For many, the warning has been a wake-up call. Joe Regan, an Irish expat who recently settled in the Algarve, said:
“I was completely unaware this would potentially impact over 90,000 pensioners in Ireland and it wasn’t until I spoke to one of the wealth managers through Portugal Pathways that I had any idea I needed to act on it.
“Not only has it helped me solve that problem, it has allowed me, under my NHR, to make even more potential upsides after the initial 10 years thanks to their advice.”
About Portugal Pathways
Portugal Pathways has supported hundreds of Golden Visa residency-by-investment applications and provides expert guidance through its professional supply chain network on luxury property, wealth management, and tax optimisation, including post-NHR tax regime planning, as well as private healthcare, IFICI tax incentive applications, money transfers and bespoke relocation solutions to enhance life and investments in Portugal.
About Portugal Investment Owners Club
The Portugal Investment Owners Club, or P Club for short, is a unique investor membership community designed for discerning individuals, families, and organisations committed to exploring and capitalising on life in Portugal and enjoying money-can't-buy experiences and exclusive events.
